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Valassis net profits down on sales, Advo costs

Valassis Communications Inc. said its fourth-quarter profit fell 66 percent due to slower sales and costs related to its proposed acquisition of Advo Inc.

A Livonia, MI-based newspaper insert distributor, Valassis said net profits in the quarter ending Dec. 31 dropped to $6.9 million from $20.3 million in the same quarter a year earlier. Quarterly revenue fell 7.4 percent to $286.4 million from $309.3 million.

The company said 2006 revenue was down 7.7 percent to $1.04 billion, with profits of $51.3 million.

Valassis said on Dec. 19 it would buy fellow direct marketer Wilton, CT-based Advo for $1.08 billion. The parties expect to close the transaction during the first half of March .

Interestingly, Valassis sued Advo to void the original deal last August, accusing Advo management of misrepresenting the company’s financial health. Advo then filed a countersuit, saying Valassis had no right to back out of the agreement.

As part of the deal, the companies have agreed to dismiss their litigation in the Court of Chancery for New Castle County, DE.

Valassis initially pursued Advo in hopes a deal would curb its reliance on newspaper inserts and let it take advantage of growing demand for targeted advertising.

The transaction will create the nation’s largest integrated media services provider, featuring comprehensive product and customer offerings in the industry serving 20,000 advertisers worldwide, including 94 of the top 100 advertisers in the United States.

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